Investors looking for the best finance stocks to buy can look at consumer loan companies. Within the auto financing segment, Credit Acceptance Corporation reported its Q22020 earnings on July 30th, 2020. Revenue was up 9.6% year-on-year to $406.3 million. Higher finance charges drove the increase in revenues. Earnings per share went down from $8.68 per share to $5.40 per share. However, the earnings per share were still above analyst estimates of around $4.60.
Importantly, the earnings per share number included certain non-recurring expenses. If these were excluded, then earnings per share came out to $8.63 per share. Meanwhile, provisions from credit losses rose significantly to $139.4 million. This rise reflected the adoption of the current expected credit loss or CECL accounting standard.
One important development for the company has been the increasing values of used cars. To that point, Credit Acceptance Corporation Senior VP and Treasurer Douglas Busk said, “Some of the loans that you originate, you’re going to end up repossessing. And on the day you sell that collateral, it matters what, what the market is. In a good market, you’ll get a little bit more money, in a bad market you’ll get a little bit less.”
Credit Acceptance Corporation has been an interesting finance stock to buy if investors are looking to play the consumer auto loan segment. Its revenues have grown at an average annual rate of 15% over a 3 and 5-year period. Its return on equity has stayed above 30% for the past decade. The return on assets has stayed around the 10% mark in recent years. These metrics are healthy enough to count Credit Acceptance Corporation among the best financial stocks to buy 2020.
Some high-return stocks this year that can also be considered to be among the best financial stocks 2020 are payments company Paypal, financial planning firm Ameriprise, and digital payments company Square.